On November 15, 2016, the U.S. Securities and Exchange Commission (“SEC”) issued its 2016 Annual Report to Congress on the Dodd-Frank Whistleblower Program. According to Jane Norberg, Chief of the SEC Office of the Whistleblower, “Fiscal Year (FY) 2016 was historic for the SEC’s whistleblower program,” including surpassing the $100 million mark in awards issued since the program started. Norberg continued: “Because of the key features of the whistleblower program – protecting the confidentiality of individuals who report through the program, taking action against employers who retaliate against or interfere with their employees’ ability to report wrongdoing to the agency, and awarding whistleblowers whose information leads to successful enforcement actions – we expect that the Commission will continue to receive high-quality tips that can be leveraged to detect and halt fraud earlier and more effectively.”
4,200 Tips, $57 Million Awarded in 2016. During FY 2016 alone, the SEC received more than 4,200 tips and awarded more than $57 million to 13 whistleblowers, including 6 of the 10 highest awards ever issued under the program. Each of the whistleblower awards resulted from information the SEC did not previously know, and which led to the opening of an investigation or significantly contributed to a successful enforcement action.
Enforcement Actions to Protect Whistleblowers. The SEC also reported “significant and ground-breaking enforcement activity on the whistleblower protection front,” including the first stand-alone case brought against a company that fired a whistleblower after he reported questionable financial statements to senior management and the SEC. The enforcement action resulted in a $500,000 penalty against the company. The SEC also brought numerous enforcement actions against companies for entering into separation or severance agreements that sought to impede former employees from communicating voluntarily with the SEC. These actions demonstrate the SEC’s commitment to protecting whistleblowers. As Chief Norberg explained: “Assessing confidentiality, severance, and other kinds of agreements that may stifle a would-be whistleblower from reporting his or her information to the agency and that strip away the very incentives Congress intended for the program will continue to be a top priority for the SEC’s Office of the Whistleblower . . . .”
Claims Leading to Awards. Though the SEC is prohibited from disclosing any information that reasonably could be expected to reveal the identity of a whistleblower, the Report discloses that 65% of award recipients were current or former insiders at the company on which they reported information of wrongdoing. The remaining award recipients were either investors who had been victimized by the fraud, professionals working in the same or a related industry, or individuals who had a personal relationship with the wrongdoer. The Report also provides that awards have resulted from complaints about financial services firms (including broker-dealers and investment advisers), Ponzi-schemes, false or misleading offering memoranda or marketing materials, accounting irregularities, and internal controls violations, among others.
Worldwide Whistleblowing. Whistleblower tips were filed by citizens of every U.S. state and more than 60 foreign countries (including citizens of every continent but Antarctica) during 2016.
For more information about the SEC Whistleblower Program and the Firm’s resources in this area, please visit the Robbins Geller Rudman & Dowd LLP Whistleblower page.